Q

How do home improvements affect homeowners insurance?

A

Some home improvement projects may make you more eligible for coverage and even result in a discount on premiums. Others, however, may increase home insurance costs.

Homeowners insurance costs an average of around $1,250 a year, but there are lots of factors that can affect the price of insurance premiums. And your rates may change year-to-year, especially if you make changes to your home. Some home improvement projects, for example, like replacing your old roof with a new, storm-resistant one, could result in cheaper premiums. But on the other hand, some home improvements that might seem great to you — like installing a pool or adding an extension to your home — may end up increasing your coverage needs and insurance costs. 

Here is a list of home improvement projects and home characteristics that may affect your insurance premiums.

Home improvements that will change your insurance but may not save you money

Certain home improvements, renovations, or additions to your property may change your coverage needs and won’t save you any money. They may even increase the cost of your premiums. Those include:

  • Adding a pool

  • Installing a diving board to your pool

  • Expanding the size of your home, like building an extension

  • Adding a room

  • Building a shed or other detached structure

  • Building a fountain

  • Renovating your bathroom or kitchen

  • Adding a fireplace or chimney

  • Installing a wet-bar 

  • Installing solar panels

  • Getting a dog or exotic pet

  • Buying a trampoline

All of the changes above will typically change your coverage needs. During the underwriting stage of your insurance application, insurers will assess your overall risk factor to determine how likely you are to file a claim. Insurers categorize things like pools, diving boards, and trampolines as “attractive nuisances”, meaning they increase your liability risk because there’s a chance of someone getting injured. It’s typically suggested that you increase the amount of liability coverage in your policy if you have an attractive nuisance on your property to better financially protect yourself in the event that someone is severely injured at your home and you’re found liable. 

Any increase in coverage will raise your rates. If you add an extension to your home, you’re going to need more dwelling coverage since the replacement cost of your home will change. Similarly, if you renovate your kitchen or bathroom with new appliances — and the renovations are more expensive than the original —  you should increase your dwelling coverage limits to reflect the new rebuild costs to make sure you’re fully covered in the event of a total loss. 

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Home improvements that can save you money

If you update your home with newer or safer products, like by installing a new HVAC/heating system or fortifying your home with a central burglar alarm, your insurance company may offer you a discount. Here are some other home improvement measures that may result in cheaper home insurance premiums:

  • Replacing your plumbing

  • Replacing your wiring

  • Making your home LEED certified

  • Hail/impact resistant roofing

  • Installing fire or burglar alarms

  • Auto water shut-off valves

  • Storm shutters/resistant windows

  • Water leak sensors on pipes and valves

  • Water leak alarms

  • Interior sprinkler system in case of fire

  • Installing a sump pump

  • Deadbolt locks

Home improvements that may make you more eligible for coverage

The less risky insurance companies consider you and your home to be, the more eligible a candidate you are for coverage. If you live in an older home with aluminum wiring, for example, and you replace it with new copper wiring, insurers may be more likely to cover you. Here are a few other updates you can make to your home that will likely make you more eligible for coverage.

  • Removing knob and tube wiring

  • Getting rid of a trampoline

  • Removing a diving board

  • Fencing in a pool (most insurers require this)

  • Enclosing your home’s foundation

  • Not owning a “dangerous” dog breed or exotic pet